Mammalian DOCK180 protein and its orthologues Myoblast City (MBC) and CED-5 in Drosophila and Caenorhabditis elegans, respectively, function as critical regulators of the small GTPase Rac during several fundamentally important biological processes, such as cell motility and phagocytosis. The mechanism by which DOCK180 and its orthologues regulate Rac has remained elusive. We report here the identification of a domain within DOCK180 named DHR-2 (Dock Homology Region-2) that specifically binds to nucleotide-free Rac and activates Rac in vitro. Our studies further demonstrate that the DHR-2 domain is both necessary and sufficient for DOCK180-mediated Rac activation in vivo. Importantly, we have identified several novel homologues of DOCK180 that possess this domain and found that many of them directly bind to and exchange GDP for GTP both in vitro and in vivo on either Rac or another Rho-family member, Cdc42. Our studies therefore identify a novel protein domain that interacts with and activates GTPases and suggest the presence of an evolutionarily conserved DOCK180-related superfamily of exchange factors.